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Chinese regulators have failed to approve General Motors’ proposal to sell Hummer to Sichuan Tengzhong Heavy Industrial Machinery Co., according to two people close to the deal.

The approval was the last hurdle for the deal to go through, which would transfer ownership of the legendary American SUV brand to the privately-owned Chinese maker of special-use vehicles, structural components for highways, bridges, and construction equipment for only $150 million. This amount is nearly 70 percent less than GM originally valued the brand in bankruptcy court in the summer of 2009.

In the beginning of 2010, GM extended the deadline for the sale until the end of February.

Only Normal…

“It’s only normal for the Chinese government not to approve the deal,” said Lin Huaibin, a Shanghai-based analyst for IHS Global Insight. “To allow this type of vehicle on a large scale isn’t in line with government policy.” What government policy, exactly? In an effort to reduce oil imports and pollution, China has been encouraging automakers to produce more fuel-efficient cars such as hybrids.

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Plans For Hummer

What’s interesting here is that both parties have agreed to the deal and want it to go through. Tengzhong has previously stated that its plans include bringing Hummer into markets outside the U.S., which currently makes up more than two-thirds of the brand’s sales. Tengzhong also planned to develop more fuel-efficient SUVs, according to CEO Yang Yi.

But Not All Is Lost…

The deal may still come to fruition even without approval from the Chinese government. This may happen by taking advantage of a few international loopholes. For what it’s worth, reports of China’s government having blocked Tengzhong’s bid are “not accurate,” according to Wang Chao, assistant commerce minister. Apparently, China’s Ministry of Commerce has not yet received an application for the acquisition, Chao said.

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GM Authority Founder with a passion for global automotive business strategy.